After the Canada Revenue Agency (CRA) released the details of the GST/HST on out-of-province sales in Canada, we decided to share some of our knowledge with you. Here’s what you need to know:
What is the GST/HST?
The goods and services tax (GST) is a federal tax that applies to most goods and services sold in Canada. The harmonized sales tax (HST) combines the GST with provincial sales taxes, making it one indirect tax collected by the federal government on behalf of all provinces and territories except Quebec. In addition to these two taxes, there are also other forms of consumption taxes that you may need to be aware of depending on where your customers live:
- Provincial Sales Tax (PST): A provincial tax that applies only in Alberta, British Columbia (BC), Manitoba, New Brunswick (NB), Newfoundland & Labrador (NL), Nova Scotia (NS), Ontario PEI Quebec/QUEBEC!! Saskatchewan
If you sell goods or services to customers in Canada, then you need to charge and collect the goods and services tax (GST) on Canadian sales.
If you’re a Canadian business, whether you are located in Ontario or Alberta, and sell goods or services to customers in Canada, what sales tax do I charge for out-of-province sales?
The GST is a 5% federal tax charged on the total price of all taxable goods and services sold in Canada. It is paid by consumers and businesses who make taxable supplies of property and services. This includes sales between businesses considered “input taxed”, such as real estate agents when they buy office space; however, it does not include purchases made by an individual who uses them personally – for example: buying groceries for home consumption).
When selling to a customer in Canada, you must charge them GST on their purchase and remit that GST to the Canada Revenue Agency.
When selling to a customer in Canada, you must charge them GST on their purchase and remit that GST to the Canada Revenue Agency.
When making an out-of-province sale to a Canadian customer, you must charge them the appropriate provincial sales tax (PST) rate based on where they live and then add this amount to your GST total.
If you don’t charge the correct tax amount, your business could be fined and even charged with criminal offences. The Canada Revenue Agency can hold you personally responsible for these mistakes, which could affect your credit rating or even land you in jail.
How do I charge out-of-province customers?
You need to be aware of the tax rates in your province and those in the customer’s province. The rate will depend on where they live, so you must know where your customers are from.
For example: If a customer buys something from you and lives in Ontario (the harmonized sales tax (HST) rate is 13%), then you must charge them 13% HST on top of what they pay for their purchase.
Suppose a customer lives in British Columbia (the GST rate is 5%) but purchases from an online store based in Alberta (the GST rate is 5%). In that case, there will not be any additional taxes added onto their bill at checkout because both provinces have the same tax rate on goods purchased online or otherwise out of province.*
Selling online between provinces
As a Canadian business owner, if you sell online to customers in other provinces or territories of Canada, then you have to charge the applicable GST/HST rate on each sale.
To do this, use Shopify’s multi-channel sales tool to collect and remit taxes from your out-of-province customers based on their province or territory. You can manually enter these amounts into Shopify Payments for each transaction (see below).
If you’re using Shopify Payments as your payment gateway:
- Set up tax rules in Settings > Taxes & Tax Rules so that it knows which province or territory each customer lives in (these are called “tax locations”). When someone makes an order from outside their tax location, we’ll apply the appropriate rate automatically when billing them through Shopify Payments.
- If you’re using another payment gateway: If you use Shopify Payments as your payment gateway and want to manually enter the amount of GST/HST that you owe on each transaction, then make sure to do so in Settings > Taxes & Tax Rules. In this section, select Manual Entry under “How should I charge taxes?”
The rate of GST is 5% in most provinces. However, some provinces have different tax rates on taxable goods and services.
The rate of GST is 5% in most provinces. However, some provinces have different tax rates on taxable goods and services. For example, the rate of GST in Ontario is 8%.
The goods and services tax (GST) is a federal tax charged on most goods and services in Canada. The GST rate is 5% across all provinces, with some exceptions.
Know your tax regulations for out-of-province sales.
If you sell goods or services to clients in other provinces and territories, you must charge and remit the GST/HST to the Canada Revenue Agency (CRA).
The CRA has published information on registering for GST/HST and what records you need to keep. You should also check with your provincial government regarding their requirements for charging and remitting taxes on out-of-province sales.
If you sell goods or services to customers outside of Canada, you do not have to charge and remit GST/HST. However, if you sell goods or services to someone in another province or territory worth more than $30,000, you will have to pay the Harmonized Sales Tax (HST) on those sales.
Conclusion
The GST/HST is a complex tax, but if you keep up with it and know your rights as a seller, you can avoid much trouble. Remember that your customers may be unaware of the GST/HST regulations and may only realize they’re being charged tax on their purchase after they receive their bill. It’s important to ensure all your customers know this charge before buying anything from your store so there are no surprises later down the line!
